The Asset Management Exchange (Ireland) Limited’s (the “Manager”) remuneration policy is designed to ensure that compensation plans are consistent with and promote sound and effective risk management; and do not encourage excessive risk taking; include measures to avoid conflicts of interest; and are in line with the firm’s business strategy, objectives, values and long-term interests.
In accordance with its obligations under Directive 2009/65/EC, as amended (the “UCITS Directive”) as implemented in Ireland by the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (S.I. No. 352 of 2011), as amended, consolidated or substituted from time to time (the “UCITS Regulations”), the Manager is required to have remuneration policies for those categories of staff (“Identified Staff”), including senior management, risk takers, staff responsible for control functions, and any employees receiving total remuneration that takes them into the same remuneration bracket as senior management and risk takers, whose professional activities have a material impact on the risk profiles of the Manager or any Undertakings of Collective Investment in Transferable Securities (“UCITS”) under management. The remuneration policies must be consistent with and promote sound and effective risk management (and the principles as outlined in Schedule 1) and not encourage risk-taking which is inconsistent with the risk profiles, rules or instruments of incorporation of the Manager or the UCITS it manages.
Application of policy
The Manager has a Board of Directors. The Directors that are not also employees of the Manager receive a fixed fee only and do not receive performance-based remuneration.
The designated person with responsibility for Regulatory Compliance has responsibility for the oversight of compliance with this remuneration policy. It will review the appropriateness of this remuneration policy annually and will ensure that it is operating as intended. It will also review this remuneration policy to ensure it continues to be compliant with applicable national and international regulations, principles and standards. This remuneration policy shall be reviewed and updated as necessary on at least an annual basis or as and when is required or deemed necessary by the Manager.
Material changes to this remuneration policy will be approved by the Board.
Remuneration Policy Framework
The policy reflects the Manager’s objective for good corporate governance and:
- Is consistent with and promotes sound and effective risk management and does not encourage risk-taking which is inconsistent with the risk profile, rules or instruments of incorporation of the Manager or any UCITS it manages; and
- Is consistent with the Manager’s or any UCITS business strategy, objectives, values and interests and includes measures to avoid conflicts of interest.
The policy is consistent and promotes sound and effective risk management by:
- Having a business model which by its nature does not promote excessive risk taking; and
- Ensuring that the fixed salary element of those involved in relevant functions reflects the market rate.
In preparing this remuneration policy the Manager has taken into account the nature, scale and complexity of its business. In determining the range of activities to be undertaken by the Manager, the Manager has given due consideration to the number of funds it acts as UCITS management company for, the type of investments of such funds, the investment strategies of such funds, the investment location and distribution model and the investor base of such funds. Due regard has also been given to the resources available to the Manager, and the resources and expertise of the various third parties engaged to support the Manager and carry out certain functions on its behalf.
The Manager is also authorised by the Central Bank as an alternative investment fund manager (“AIFM”) under the Part 2 of the AIFM Regulations and applies a separate remuneration policy in accordance with the AIFM Regulations in respect of the funds it acts as AIFM for.
As per Article 5 of the EU Sustainable Finance Disclosure Regulation (“SFDR”), financial market participants are required to include in their remuneration policies information on how those policies are consistent with the integration of sustainability risks and shall publish that information on their websites. As noted within this policy, the Manager generally delegates portfolio management activity to underlying portfolio managers. Where delegated, the portfolio manager shall ensure that it adopts remuneration policies and procedures which are consistent with the integration of sustainability risks, if sustainability risks are integrated into the investment decision making process. The Manager shall seek confirmations from each delegate portfolio manager that these policies are being complied with and the remuneration structures are not encouraging excessive risk-taking with respect to sustainability risks and remuneration is limited to risk adjusted performance. However, in some instances, the portfolio management function is discharged directly by AMXI with assistance from the portfolio manager. Accordingly, the Manager believes that where AMXI is responsible for directly integrating sustainability risks on behalf of a portfolio manager, its existing remuneration framework as detailed in this policy is sufficient to prevent excessive risk taking in respect of sustainability risks.
Scope of remuneration
Remuneration consists of all forms of payments or benefits made directly by, or indirectly, but on behalf of the Manager, in exchange for professional services rendered by staff. This includes, where appropriate:
- All forms of payment or benefits paid by the Manager;
- Any amount paid by the UCITS, including any portion of performance fees; and/or
- Any transfer of units or shares of any UCITS;
in exchange for professional services rendered by the Identified Staff.
For the purposes of the above, whenever payments, excluding reimbursements of costs and expenses, are made directly by the UCITS to the Manager for the benefit of relevant categories of Identified Staff, for professional services rendered, which may otherwise result in a circumvention of the relevant remuneration rules, they shall be considered remuneration for the purpose of this policy.
Fixed remuneration means payments or benefits without consideration of any performance criteria. Variable remuneration means additional payments or benefits depending on performance or, in certain cases, other contractual clauses.
The provisions of this remuneration policy only apply to Identified Staff. Pursuant to the terms as defined in ESMA’s Guidelines on sound remuneration policies under the UCITS Directive, applicable from 1 January 2017 (ESMA/2016/575) (the “Guidelines”), Identified Staff are staff members who have a material impact on the Manager’s risk profile, defined as: "categories of staff, including senior management, risk takers, Control Functions, and any employee receiving total remuneration that falls into the remuneration bracket of senior management and risk takers, whose professional activities have a material impact on the management company’s risk profile or the risk profiles of the UCITS that it manages and categories of staff of the entity(ies) to which investment management activities have been delegated by the management company, whose professional activities have a material impact on the risk profiles of the UCITS that the management company manages”.
For the purposes of the above, “Control Functions” means: “staff (other than senior management) responsible for risk management, compliance, internal audit and similar functions within a management company, (e.g. the Chief Financial Officer to the extent that he/she is responsible for the preparation of the financial statements).
Remuneration bracket means: “the range of total remuneration of each of the staff members in the senior management and risk taker categories – from the highest paid to the lowest paid in these categories”.
The following categories of staff, unless it is demonstrated that they have no material impact on the Manager’s risk profile or on a UCITS it manages, are included as Identified Staff:
- Senior management;
- Staff responsible for Control Functions;
- Staff responsible for heading the investment management, administration, marketing, human resources;
- Other risk takers – such as staff members who acting individually or as part of a group can exert material influence on the Manager’s risk profile or the UCITS it manages.
Additionally, staff whose remuneration takes them into the same bracket as senior managers and risk takers but who do not fall into one of the categories above must be assessed to determine whether they have a material impact on the risk profile of the Manager or of a UCITS it manages and should be included as Identified Staff.
A list of the Manager’s identified shall be maintained by the Manager. It should be noted that the inclusions of persons in this list relates specifically to their roles within the Manager and their remuneration (if any) received directly by the Manager and shall not affect any other role or remuneration such persons may otherwise receive from entities connected with the Manager, delegates of the Manager or otherwise.
Risk management function
The remuneration of those engaged in the performance of the risk management function reflects the achievement of the business objectives linked to the risk management function, independently of the performance of the business areas in which they are engaged.
The method of determining the remuneration of a compliance officer and other persons in the compliance function do not affect their objectivity and are not likely to do so as their remuneration is not linked in any way to the performance of the UCITS.
Remuneration Principles – in compliance with UCITS Requirements
It is primarily the responsibility of the Manager to assess its own characteristics and to develop and implement remuneration policies and practices which appropriately align to the risks faced and provide adequate and effective incentives to its Identified Staff.
When establishing and applying the total remuneration, inclusive of salaries and discretionary pension benefits for Identified Staff, the Manager shall comply with the general principles set out below in a way and to the extent that is appropriate taking into account its size, internal organisation and the nature, scope and complexity of its activities.
Investment Management Delegates
The Manager appoints delegates to carry out investment management functions on its behalf.
In accordance with the Guidelines, where the UCITS remuneration rules would otherwise be circumvented, the Manager will seek to ensure that affected delegates (i.e. those entities to which investment activities have been delegated) are subject to regulatory requirements on remuneration that are “equally as effective” as those under the Guidelines or that appropriate contractual agreements are in place to ensure that the delegation arrangements do not circumvent the remuneration requirements contained in the Guidelines.
UCITS management companies and self-managed investment companies that are significant in terms of their size or of the size of the funds they manage, their internal organisation and the nature, the scope and the complexity of their activities are required to establish a remuneration committee. It is not considered appropriate for the Manager to establish a remuneration committee.
Role of the Designated Person
The Directors have collective responsibility for this Policy. The Designated Person with responsibility for Regulatory Compliance will assist in ensuring that this Policy is acted upon and complied with, subject to the overall monitoring and oversight of the Board. If any issue arises in connection with this Policy, such issue will be escalated in accordance with the Manager’s Escalation Procedures as set out in its Programme of Activity.
Schedule 1 – Remuneration principles
In accordance with Regulation 24B of the UCITS Regulations, the Manager must comply with the following principles in a way and to the extent that is appropriate to the Manager’s size, internal organisation and the nature, scope and complexity of its activities:
- The remuneration policy is consistent with and promotes sound and effective risk management and does not encourage risk taking which is inconsistent with the risk profiles, rules or instruments of incorporation and the nature, scope and complexity of its activities;
- The remuneration policy is in line with the business strategy, objectives, values and interests of the management company and the UCITS that it manages and of the investors in such UCITS, and includes measures to avoid conflicts of interest;
- The remuneration policy is adopted by the management body of the management company in its supervisory function, and that body adopts, and reviews at least annually, the general principles of the remuneration policy and is responsible for, and oversees, their implementation; the tasks referred to in this point shall be undertaken only by members of the management body who do not perform any executive functions in the management company concerned and who have expertise in risk management and remuneration;
- The implementation of the remuneration policy is, at least annually, subject to central and independent internal review for compliance with policies and procedures for remuneration adopted by the management body in its supervisory function;
- Staff engaged in control functions are compensated in accordance with the achievement of the objectives linked to their functions, independently of the performance of the business areas that they control;
- The remuneration of the senior officers in the risk management and compliance functions is overseen directly by the remuneration committee, where such a committee exists;
- Where remuneration is performance-related, the total amount of remuneration is based o a combination of the assessment as to the performance of the individual and of the business unit or UCITS concerned and as to their risks and of the overall results of the management company when assessing individual performance, taking into account financial and non-financial criteria;
- The assessment of performance is set in a multi-year framework appropriate to the holding period recommended to the investors of the UCITS managed by the management company in order to ensure that the assessment process is based on the longer-term performance of the UCITS and its investment risks and that the actual payment of performance-based components of remuneration is spread over the same period;
- Guaranteed variable remuneration is exceptional, occurs only in the context of hiring new staff and is limited to the first year of engagement
- Fixed and variable components of total remuneration are appropriately balanced and the fixed component represents a sufficiently high proportion of the total remuneration to allow the operation of a fully flexible policy on variable remuneration components, including the possibility to pay no variable remuneration component;
- Payments relating to the early termination of a contract related performance achieved over time and are designed in a way that does not reward failure;
- The measurement of performance used to calculate variable remuneration components or pools of variable remuneration components includes a comprehensive adjustment mechanism to integrate all relevant types of current and future risks;
- Subject to the legal structure of the UCITS and its fund rules or instruments of incorporation, a substantial portion, and in any event at least 50%, of any variable remuneration component consists of units of the UCITS concerned, equivalent ownership interests, or share-linked instruments or equivalent non-cash instruments with equally effective incentives as any of the instruments referred to in this point (m), unless the management of the UCITS accounts for less than 50% of the total portfolio managed by the management company, in which case the minimum of 50% does not apply. The instruments referred to in this point shall be subject to an appropriate remuneration policy designed to align incentives with the interests of the management company and the UCITS that it manages and the investors of such UCITS. Member States or their competent authorities may place restrictions on the types and designs of those instruments or ban certain instruments as appropriate. This point shall apply to both the portion of variable remuneration component deferred in line with point (n) and the portion of the variable remuneration component not deferred;
- A substantial portion, and in any event, at least 40% of the variable remuneration component, is deferred over a period which is appropriate in view of the holding period recommended to the investors of the UCITS concerned and is correctly aligned with the nature of the risks of the UCITS in question. The period referred to in this point shall be at least three years; remuneration payable under deferral arrangements vests no faster than on a pro-rata basis; in the case of a variable remuneration component of a particularly high amount, at least 60% of the amount shall be deferred.
- The variable remuneration, including the deferred portion, is paid or vests only if it is sustainable according to the financial situation of the management company as a whole, and justified according to the performance of the business unit, the UCITS and the individual concerned. The total variable remuneration shall generally be considerably contracted where subdued or negative financial performance of the management or of the UCITS concerned occurs, taking into account both current compensation and reductions in pay-outs of amounts previously earned, including through malus or clawback provisions.
- The pension policy is in line with the business strategy, objectives, values and long-term interests of the management company and the UCITS that it manages. If am employee leaves the management company before retirement, discretionary pension benefits shall be held by the management company for a period of five years in the form of instruments referred to in point (m). In the case of an employee reaching retirement, discretionary pension benefits shall be paid to the employee in the form of instruments referred to in point (m), subject to a five-year retention period.
- Staff are required to undertake not to use personal hedging strategies or remuneration-and-liability related insurance to undermine the risk alignment effects embedded in their remuneration arrangements.
- Variable remuneration is not paid through vehicles or methods that facilitate the avoidance of the requirements laid down in the UCITS Regulations.